New Wrinkle on Timing Requirements for Plan Investment Disclosures

In 2012, a new set of Department of Labor (DOL) participant disclosure requirements took effect for 401(k) plans and other individual account retirement plans that allow for participant investment direction. The rules require disclosure of certain plan-related information (such as procedures for providing investment directions and plan-level fees), as well as disclosure of certain investment-related information (such as historical returns and fee information for each of a plan’s available investment alternatives). The investment-related information must be provided annually in chart format, referred to as the “comparative chart.”

Plans that operate on a calendar-year basis were required to provide an initial comparative chart not later than Aug. 30, 2012. An updated version of the comparative chart must be provided “at least annually thereafter.” DOL rules defines this requirement as “at least once in any 12-month period, without regard to whether the plan operates on a calendar or fiscal year basis.”

A number of commentators noted to the DOL that the rigidity of this timing rule prevents many plans from sending comparative charts along with other relevant disclosures, such as a quarterly benefit statement or the plan’s annual notice regarding qualified default investment alternative (QDIA) procedures. For example, a calendar-year 401(k) plan that delivered the comparative chart on Aug. 25, 2012, would be required to deliver a new comparative chart by Aug. 25, 2013. If the employer instead wanted to provide the chart in November along with its annual QDIA notice, it would be required to deliver two comparative charts in 2013 (i.e., one before Aug. 25, 2013, to “re-set” the 12-month measurement period and another at the end of the year along with the QDIA notice).

In response to these comments, the DOL announced on July 22, 2013, a temporary enforcement policy and that it was considering revising a permanent change in the comparative-chart timing rules. The key points are as follows:

• One-time right to delay delivery of the 2013 comparative chart. Under the enforcement policy, the DOL will deem the 2013 comparative chart to be timely delivered so long as delivery is made no later than 18 months after the date on which the 2012 comparative chart was delivered. Therefore, in the example above, the employer would have until Feb. 25, 2014, to provide its 2013 comparative chart (i.e., 18 months following Aug. 25, 2012). In order to qualify for the delay, the employer must determine that delaying delivery will benefit participants and beneficiaries (such as by providing related disclosures at a single time).
• Delay available for 2014 if delivery of the 2013 comparative chart is not delayed. Employers who plan to deliver the 2013 comparative chart on or before the normal 2013 deadline will have the right to delay delivery of their 2014 comparative chart until 18 months after the date on which they deliver their 2013 comparative chart. Thus, if the employer described above delivers its 2013 comparative chart on Aug. 20, 2013, it will have the option of delaying delivery of its 2014 comparative chart until Feb. 20, 2015. As for 2013, the DOL’s enforcement policy applies if the employer determines that the delay will benefit participants.
• Permanent change in the timing rules under consideration. While the enforcement policy is in effect, the DOL will consider possible modification of the 12-month timing requirement. A possible change under consideration is to provide a specified window period each year within which the comparative chart must be delivered. The DOL has cautioned, however, that no inferences should be drawn that the enforcement policy will be adopted as part of those changes.

Employers should discuss with their record-keepers the potential advantages of utilizing the comparative-chart delivery delay for 2013 or 2014, as appropriate. This decision likely will be affected by the plan’s specific design and its administrative procedures for general compliance with the participant disclosure rules.

Additional information regarding these participant disclosure requirements can be found in our prior WorkCite articles of Jan. 12, 2011, and Aug. 8, 2012, regarding this subject.

For further information, please contact either of the authors, Jeffrey R. Capwell or Robert M. Cipolla, or any other member of the McGuireWoods employee benefits team.